The Double Pension Effect

fred246

My dad had no savings. He retired at 57 when he felt his company pension income was enough to live on. He was fine but when his state pension kicked in at 65 he had so much money he didn't know what to do with it. It always strikes me that there must be millions in a similar position. All it takes is a little bit of savings and you can retire years earlier knowing that when state pension kicks in you will be fine. Retiring early on a reduced income feels worrying but when you have the savings to take you to state pension age it should work out well. I always wonder how many people could retire much earlier if they planned and calculated for this effect.

pensionpawn

Better to retire earlier when you can still enjoy the freedoms that it brings rather than push on for the larger pot and start paying oodles of tax / croke it before you use it. I'll never forget my father saying to me, when he retired at 65, that he had just come into the 'good money' when too old to fully enjoy it. He also used to say 'tomorrow is never promised'. Do the sums on what you need (or want), set your goal, make a plan and execute it. Can't rewind and try again.....

enthusiasticsaver

Totally agree. We retired at 58 on strength of our savings and DB pensions which were reduced due to us going early. The pensions are more or less what we need to live comfortably, the savings are a buffer and when our state pensions pay out we will have a higher income than when we were working. Yes, our pensions would have been higher if we had carried on working but we wanted to go while fit and healthy and we would only pay more tax if they were higher. We don't skimp on anything and take every opportunity we can to do the things we have always wanted to.

Paul_Herring

While I may be planning on retiring early anyway, I'm not expecting much in the way of state pension and have planned on that basis.

Any state pension I do get would be a pleasant surprise, not something I'll be reliant on.

redux

A retired person I know pays about £100,000 a year for both his parents in a care home.

lisyloo

redux wrote: »

A retired person I know pays about £100,000 a year for both his parents in a care home.

Is that his money or theirs? (They May still be getting pensions themselves)

I make the payments for my MIL but it’s her money from the sale of the marital home.

If that’s purely his money then he must have an enormous pension after tax.

OldMusicGuy

The big difference today is that far fewer people have a DB company pension that will provide a healthy level of risk-free, inflation linked income. So the "double pension" doesn't exist for many people.

LV published research recently that showed the average pension pot for people aged 45-54 was £71,342. Not enough to fund early retirement unless they have other income sources.

barnstar2077

I plan on retiring or going part time at 55, living on savings until 58, then using my work DC pension and a SIPP to get me to my state pension. There will still be enough money left in the SIPP to top up the state pension to a reasonable amount if all goes to plan.

My mum retired at 68, two weeks later she developed kidney problems, she died a year later from lung cancer having had a year of going backwards and forwards to hospital for treatment.

Retire while you still can would be my advice to anyone. Obviously if someone could retire at 50 but doing an extra year or two would give them a much better lifestyle then it is a judgement call that only they can make based on their health etc. Spend as much time with your friends and family while you still can.

Some people say they would be bored. I think those people must be sadly lacking in imagination if when given months to contemplate, and a world of possibilities, they can't think of something to do!

AnotherJoe

redux wrote: »

A retired person I know pays about £100,000 a year for both his parents in a care home.

I think it's pointless trying to cater for that sort of eventuality. You'd wreck the rest of your life trying to save and invest enough, you'd have to save enough not just for parents but yourself and partner as well. Save enough for a decent retirement for yourselves which is hard enough for most.hope that if the moment arrives parents house will cater for their care, for a while at least.

Paul_Herring

barnstar2077 wrote: »

Obviously if someone could retire at 50 but doing an extra year or two would give them a much better lifestyle then it is a judgement call that only they can make based on their health etc.

OMY (one more year) syndrome. It's never just a year...

https://www.physicianonfire.com/omy/
https://www.theretirementmanifesto.com/the-one-more-year-syndrome/
https://www.makesmarterdecisions.com/finding-cure-one-year-syndrome/

barnstar2077

Paul_Herring wrote: »

OMY (one more year) syndrome. It's never just a year...

https://www.physicianonfire.com/omy/
https://www.theretirementmanifesto.com/the-one-more-year-syndrome/
https://www.makesmarterdecisions.com/finding-cure-one-year-syndrome/

I agree, it isn't a good idea to keep adding on "just one more year." What I meant to say was that if you calculate that working for the next ten years means you can retire, but working for twelve makes all of your dreams come true then clearly you have some thinking to do. I wouldn't recommend that anyone makes it up as they go along when it comes to their finances.